Gold posts sharpest daily drop in nearly six weeks as dollar, Treasury yields edge up

“Clearly, the unexpectedly strong U.S. retail sales have boosted the dollar and gold has corrected sharply lower,” he told MarketWatch. “It appears the move lower has been accelerated by stops being triggered and is now touching support at $1,750.”

For now, “the path of least resistance looks to be lower and I suspect the bears will be hammering on the support levels to test the resolve of the bulls,” he said.  

Meanwhile, investors note that prices for precious metals are expected to be choppy as investors await clarity from the U.S. Federal Reserve next week on its plans for tapering bond purchases that provided liquidity to markets during the worst of the pandemic back in the spring of 2020.

Metals traders also will be watching for clues on the timing of eventual interest-rate hikes. The Fed’s two-day gathering is set for Sept. 21-22.

December gold GC00, -2.27% GCZ21, -2.27% fell $38.10, or 2.1%, to settle at at $1,756.70 an ounce, which was the steepest daily percentage and dollar decline for bullion since Aug. 6, when it fell $45.80, or 2.5%. The settlement was also the lowest since Aug. 12, FactSet data show. On Wednesday, prices fell 0.7%.

Gold “experienced a quick and sudden chain reaction,” as robust economic data exceeded expectations by a lot, Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.

U.S. jobless claims were slightly higher but “in a meaningful way to offset strength” of retail spending data, he said, which caused U.S. Treasury 10-year yields to go up. “The result is gold went lower and very quickly.” 

U.S. initial jobless benefit claims rose 20,000 to 332,000 in the week ended Sept. 11, the government said Thursday. Retail sales increased 0.7% last month, though economists polled by The Wall Street Journal had forecast a 0.7% drop.

Separately, the Philadelphia Federal Reserve’s business activity index rose to 30.7 in September from 19.4 in August, snapping a four-month streak of declines, the regional bank said Thursday.

Given the latest turn of events and the Fed’s desire to taper asset purchases, Wright believes gold has “room to drop further in coming days,” and doesn’t see any positive catalyst in the near term. “Gold could not surpass and hold $1,800 so it could retest $1,700 without any new interest coming into the market.”

Meanwhile, December silver SIZ21, -4.06% SI00, -4.06% lost $1.01, or 4.2%, to settle at $22.79 an ounce, logging the lowest finish since November 2020.

Thursday’s metal moves came as the U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.41%, was up 0.4% on the day and for the week so far. A stronger dollar can make assets priced in the currency comparatively more expensive to overseas buyers. Benchmark 10-year Treasury note yields TMUBMUSD10Y, 1.335% are up at around 1.327%, compared with $1.302% on Wednesday afternoon.

Among other Comex metals, December copper HGZ21, -3.17% lost 2.8% to $4.28 a pound. October platinum PLV21, -0.69% shed 0.8% to $923.30 an ounce.

December palladium PAZ21, +1.30% tacked on 1.5% to $2,021.50 an ounce, stretching its gain into a second straight session after dropping Tuesday to its lowest finish in over a year.

Also read: Why some benchmark aluminum prices have soared to a record